Turkey sounds out First Republic’s ex-exec over Central Bank job

Simsek’s office declined to comment while Erkan didn’t answer a call seeking comment.

The choice of who will succeed Governor Sahap Kavcioglu is critical for the market as President Recep Tayyip Erdogan races to complete a makeover of his economic team. Unconventional policies under Erdogan in recent years have taken the blame for an investor exodus and the worst inflation crisis in decades.

If selected, Erkan would be the first female governor of the Turkish central bank. Before installing Kavcioglu to take charge in March 2021, Erdogan ousted his three predecessors for tightening monetary policy too much as he wielded more power over the direction of interest rates. 

“The independence and prestige of the head of the Turkish Central Bank has been diminished in recent years,” said Todd Schubert, the Dubai-based head of fixed-income research at Bank of Singapore. “A combination of Erkan as head of central bank along with Simsek as finance minister would be viewed as a market friendly ‘dream team.’”

After resigning from First Republic in a surprise move more than a year ago, Erkan became CEO of Greystone, a New York-based commercial-property lender, but left after a few months.

Crain’s named her to its 40 Under 40 list in 2018.

Short list

Besides Erkan, no other names have publicly emerged as candidates to take over the Turkish central bank. Kavcioglu’s term doesn’t end until 2025.

Erkan has a PhD from Princeton University in financial engineering and applied mathematics, according to her LinkedIn page. She spent almost eight years at First Republic in roles that included president and chief investment officer. 

Just over a year after Erkan’s departure from First Republic, it became the second-biggest bank failure in U.S. history. JPMorgan Chase beat out rivals in a government-led auction for the regional lender.

Together with Simsek, Kavcioglu’s successor would face the challenge of how to normalize policy to appease markets but without drawing Erdogan’s ire.

Shortly before winning a presidential runoff last month, Erdogan told CNN that he would maintain his policy of ultra-low interest rates and promised inflation would fall as a result.

Kavcioglu never deviated from Erdogan’s unorthodox belief that cutting rates can curb inflation. Despite price growth reaching a peak of 86% last year, the central bank under his stewardship delivered zero rate hikes and instead slashed the benchmark to 8.5% from 19% at the start of his tenure.

After his appointment by Erdogan, Simsek immediately signaled that Turkey had no choice but to make it a priority “to fight inflation on a rational basis.” The next rate-setting meeting, scheduled for June 22, will show whether Erdogan will acquiesce to tighter policy in his new term.